Question

Becker Enterprises, Inc., has two products, palm-size computers and programmable calculators. Kara Rogan, the chief executive officer, is working with her staff to prepare next year’s budget. Ms. Rogan estimates that sales will increase at an annual rate of 10 percent for palm-size computers and 4 percent for programmable calculators. The current year sales revenue data follow.

Based on the company’s past experience, cost of goods sold is usually 75 percent of sales revenue. Company policy is to keep 10 percent of the next period’s estimated cost of goods sold as the current period ending inventory.

Requireda. Prepare the company’s sales budget for the next year for each quarter by individual products.b. If the selling and administrative expenses are estimated to be $500,000, prepare the company’s budgeted annual income statement for the next year.c. Ms. Rogan estimates the current year’s ending inventory will be $68,000 for computers and $32,000 for calculators and the ending inventory next year will be $78,000 for computers and $42,000 for calculators. Prepare the company’s inventory purchases budget for the next year showing quarterly figures byproduct.